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Economic growth is set to slow in the year ahead, but the pain will not be distributed evenly, according to Moody’s Investors Service.

Overall, the rating agency said the pace of growth for the G20 will ease from a projected 2.8% this year to 2.1% in 2024, before rebounding to 2.6% in the following year.

The slowdown is expected to be driven by the effects of high interest rates continuing to work their way through the economy.

“The steep increase in the cost of borrowing and tighter lending standards render a range of activities significantly more expensive, including discretionary purchases such as homes, cars and other durable goods, new business investment, business expansion and refinancing of existing loans,” the report said.

And these pressures will only intensify in 2024, as “household, corporate and sovereign debt originated at historically low rates will start to gradually roll over to today’s far higher rates.”

The divergence among countries will reflect the different pace at which the effects of higher rates work their way through local economies.

Emerging markets are expected to produce 3.7% growth in 2024, down from 4.3% this year. That still outpaces the advanced economies, which are only forecast to generate 1.0% growth next year, down from 1.7% this year.

Moody’s sees the advanced economies rebounding to 1.8% growth in 2025, while the emerging markets are expected to stay relatively flat, with 3.8% growth forecast for 2025.

Within these categories the economic slowdown will be uneven too, it said.

Among advanced economies, the U.S. is seen leading the world this year, with 2.4% growth, while Germany is forecast to suffer a 0.4% contraction.

Moody’s forecast for Canada this year has fallen to just 1.3%, and is expected to slide further to 0.8% next year, as U.S. growth slows to just 1.0%.

However, Moody’s sees Canada rebounding to 2.0% growth in 2025, ahead of the 1.8% predicted for advanced economies overall, and in line with the U.S. forecast.

The report noted that the euro area has been hit harder than other regions this year. It predicts that growth for the area “will remain subdued” in 2024.

Among emerging markets, Moody’s forecasts that China will meet its 5% growth target this year, before slowing to 4.0% in 2024 and 2025.

“Some large emerging market economies such as India, Mexico and Indonesia, have displayed remarkable resilience, while the outlook is more complicated in South Africa, Türkiye and Argentina,” it said.

While Moody’s generally expects growth to rebound across the G20 in 2025, it also cautioned that there’s increased uncertainty about these forecasts — as prediction errors “tend to be particularly high against a backdrop of slowing growth, financial tightening and other unknowns, including election-driven policy shifts, geopolitical developments and climate shocks.”

Indeed, the report warned of several related risks that could impact 2025 forecasts, including energy and food price shocks that cause inflation to rebound; high interest rates having a greater than expected impact on growth and financial stability; and cyber, climate and conflict risks (stemming from ongoing conflicts in Ukraine and Gaza), which could also reignite inflationary pressures.